Your credit report is basically your financial report card without a grade attached to it. Yes, your grade is your credit score. It’s very important you understand how you reached your credit score. Your credit report will have factors that will help you understand why your score is either high, average, or low. Let’s break down how to analyze your credit report.
First obtain your credit report
The first thing you want to do in order to analyze your credit report is obtain your free credit report from the 3 credit bureaus Experian, Equifax, and Transunion. The reason why you want all 3 reports is they all may show different things. One report may have 5 hard inquiries. Another report may have 10. One report may show one collection account. Another may show 2. Obtaining all 3 credit reports helps you compare each report in order to make sure the information is similar.
Normally, you’re only allowed to get a free credit report annually. However, since COVID came along, Annual Credit Report is currently offering free weekly credit reports for all 3 major credit bureaus until April 2021. That’s big, and the word big is an understatement.
With websites such as Credit Karma, you can only view your credit report weekly for free for Transunion and Equifax. However, with the current COVID pandemic, you can now check all 3 reports for free on annualcreditreport.com until April 2021.
Here’s how to analyze your credit report
Now that you have your credit report, lets get into how you should break it down.
- Look over your personal information on your credit report. Make sure all of the information listed is correct. Look for errors in spelling of your name, current and previous address, numbers, as well as dates.
- If you have any student loans or current active consumer loans, make sure the date opened and the terms of your loan are correct. Be sure to check and confirm your payments are being accounted for on a monthly basis as viewed on your report.
- Check for any collections or delinquent accounts. Make sure all of the information is correct, from the amount owed to the date opened, as well as the original creditor and owed amount.
- If you have any credit cards, check and see if the date you opened your credit card account is correct. Make sure all of your monthly payments are accounted for.
- Check and make sure the hard and soft inquiries on your credit report are valid. You know whether or not if you had your credit pulled over the past 2 years. Hard inquiries is when financial institutions pull your credit profile in order to see if you qualify. Hard inquiries can and usually do negatively affect your credit score. They normally stay on your credit report for up to 2 years from the date you first receive it. Soft inquiries can be when you check your own credit score on sites like Credit Karma, or if potential lenders inquire to see if you pre qualify for a loan or credit card. Soft inquiries do not harm your credit score.
Check for all red flags
When analyzing your credit report you want to first look for errors as previously mentioned. If you do not find any errors, you want to find what I consider to be red flags. Red flags would be anything that can potentially negatively affect your score. Whether its missed payments, delinquent accounts, collection accounts, excessive hard inquiries, or high balances.
Your red flags may very from other people’s red flags, as explained in this previous post. With that said, you want to identify your red flags and immediately begin to work on improving them. By improving your red flags you should start to see your score rising whether slowly or instantly.
If you do spot errors on your report, that is grounds to dispute those specific errors. Whether its a misspelling or an account that doesn’t belong to you, be sure to file a dispute with the specific credit bureau.
Be sure to check out my book Strategies to master credit for tips on how to master your credit (here).
Darnell R. McKinnon